The government of Montenegro is making a big push to attract foreign investors to the country, which earlier this year joined Serbia in a new, and looser, federation.

Montenegrin Prime Minister Milo Djukanovic said the situation in his country has dramatically improved in the past 12 months. He told prospective investors that relations with Serbia are excellent, and that the entire western Balkans region is moving towards closer integration with the European Union.

Mr. Djukanovic said that after several false starts, Montenegro is determined to privatize the large state-controlled enterprises and banks that dominate its stagnant economy. He said the giant KAP aluminum plant, the commercial banks, and major resort hotels will be privatized by the end of this year.

Many of the more than 100 representatives of multi-national companies attending an investors' conference say they are impressed with the government's position and apparent seriousness. In the past, the Montenegrin government refused to cede control of local firms to outsiders.

Both IBM and Siemens said they are hopeful about the prospects for Serbia and Montenegro.

Other companies view Montenegro as a means of entering the larger, more important Serbian market. The most immediate prospects for investment are the coastal hotels, which are mostly still state controlled and badly in need of modernization.

The telecommunications sector, also badly in need of modernization, is likely to attract investment.

Business leaders are quick to point out the region's continuing economic fragility and vulnerability to political setbacks. One said Serbia has lost several important investors because of the assassination of reformist Prime Minister Zoran Djindjic last March. A renewal of violence in Macedonia or Kosovo would also be a major setback.

While integration with Europe is the stated goal, practical roadblocks are often in the way. Even now it is difficult or impossible, for technical and political reasons, to drive a rental car from the nearby Croatian resort of Dubrovnik into Montenegro.